Litigation Metrics

Helen GillcristPreston McGowan

© CLM Litigation Management Institute 2013. All rights reserved. The course material presented herein does not represent the views or opinions of any of the individual faculty members or instructors or of any of the companies or entities with which they may be employed or affiliated. Nothing in the course materials presented should be construed as legal or professional advice or the rendering of a legal or professional opinion on any specific factual situation. Always seek appropriate legal and professional business advice in the context of specific cases.

Learning Objectives Understand the fundamentals of performance

measurement.

Objectives, measures, metrics, targets

Key objectives categories

Key litigation management objectives and measures

Measuring what counts-qualitative and quantitative.

Managing your litigation with metrics

Why Are We “Really” Here Today? Litigation industry

US tort system cost $264.6 billion in 2010*

Total cost of litigation impacts after tax profit for corporations

Thinning margins and increase cost containment Desire for more transparency.

What do we want to achieve?

How are we achieving it?

What are the results

Demand for fiscal responsibility and litigation performance

*Towers Watson

Elements Of Litigation Management

Objectives, Measures, Metrics and Targets

Often used interchangeably but they are not the same.

Define your objectives first and work your way down to targets.

Ensure that your objectives tell the complete story of your operation or initiative (financial, customer, qualitative & operational).

Identify the measures and metrics that quantify your objectives.

Objectives, Measures, Metrics and Targets

Term Definition Example

Objectives What do you want to achieve? Reduce litigation costs

Deliver quality defense

Measures What will you observe and track to determine if objective is being met?

Dollars billed or paid;

Number of cases

Metrics What are the set of measurements that quantify results?

Cost per case ($/case)

Targets What is the performance expectation for the specific metrics?

X % reduction

Adopted from Kaplan and Norton Balanced Scorecard and Strategy Maps

Key Litigation Management Perspectives

Perspective Objective

Financial Profit, Revenue, Expense, etc.

Customer What does the customer value that will drive the financial results?

Operational Which internal processes will drive customer and financial results?

Learning, Development & Structure

What skills / abilities / infrastructures will have to be enhanced in order to change, innovate and improve

the operational objectives?

Adopted from Kaplan and Norton Balanced Scorecard and Strategy Maps

Framework for Measurement

What do you want to

achieve?

What is the performance expectation?

What are the set of

measurements?

What will be observed

and tracked?

Objective Measure Metric Target

Financial

Customer

Operational

Learning, Development & Structure

Adopted from Kaplan and Norton Balanced Scorecard and Strategy Maps

Framework for Measurement - Example Objective Measure Metric Target

Financial Reduce litigation costs

• Dollars billed

• Number of cases

Cost per case X% decrease

Customer Improve quality of legal services

Examiner feedback 1 – 5 Scaling X% of respondents scored > 4

Operational Maximize use of internal resources

• Cases handed by inside counsel

• Total cases

Ratio of inside counsel cases to total cases

80% handled by inside counsel

Learning, Development & Structure

Capture, analyze and communicate retention results

• Quarterly reports

• Time between quarter close and publishing date

% of reports delivered within 3 weeks of quarter close

100% of reports delivered

Adopted from Kaplan and Norton Balanced Scorecard and Strategy Maps

Measurement Challenges

What is the right metric? What if the data does not exist? What if the data exists but is in “bad” shape? How long do I have to measure? Is it really my job to manage this data and the

reports?

Measuring What Counts Designing actionable metrics

Directly relevant to business goals and identifies the success of your inititatives

Provides insight to help improve your operation What should you do when the data doesn’t exist?

Use proxy data E-billing Mine law firm matter management/billing data Improve data quality Create data (Excel, Access or off the shelf)

Case study

Managing Your Litigation and Your Business with Metrics

Litigation planning and budgeting Law firm assessment and performance

scorecards Alternative fee arrangements Operational improvements Predictive modeling

Litigation Planning and Budgeting

Establishing Litigation Budgets

Law Firm Assessment and Performance Scorecards

Law Firm Assessment Surveys(@ end of case by claims handlers)

Assessments Must Be…

Litigated File Assessment SurveysOverall Experience Law Firm Interaction Quality of Outcome Handling Complex Cases

# Provider Prvd Type

Region State Total # of Surveys

Overall Satisfaction

Intend to Reuse

Respon-siveness

Compliance w/ Protocol

Appropriate Costs

Positive Impact

Budgeting Execution of Strategy

1 Law Firm A OC OC Western OR 1 10.0 10.0 10.0 8.0 10.0 10.0 8.0 10.02 Law Firm B OC OC Western CA 6 8.6 8.4 8.2 7.8 8.6 9.5 7.5 8.33 Law Firm C OC OC Western TX 1 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.04 Law Firm D OC OC Central LA 4 7.8 7.8 7.8 7.5 7.5 7.8 5 Law Firm E OC OC Central IA 1 7.9 7.9 7.9 7.6 8.6 8.1 8.0 8.06 Law Firm F OC OC Eastern NY 7 9.9 9.7 9.7 9.7 9.7 9.9 10.0 10.07 Law Firm G FL FL Northeast NY 49 9.0 9.1 9.0 8.8 8.9 9.0 9.3 9.58 Law Firm H OC OC Central LA 7 8.9 9.0 8.6 9.0 8.4 8.7 8.5 9.09 Law Firm I OC OC Eastern SC 1 10.0 9.0 8.0 8.0 9.0 9.0 9.0 8.0

10 Law Firm J OC OC Western NM 28 8.6 8.6 8.5 8.2 8.1 8.6 8.5 8.511 Law Firm K OC OC Eastern MD 8 7.8 7.6 7.8 7.5 7.5 7.6 7.5 8.012 Law Firm L OC OC Central MS 6 10.0 10.0 10.0 10.0 10.0 10.0 13 Law Firm M OC OC Western NA 1 6.0 4.0 7.0 6.0 4.0 6.0 4.0 6.0

1 2 3 4 5 6 7 8 9 10Strongly Disagree Disagree Agree Strongly Agree

Sample LFAC Survey QuestionsI am satisfied with the law firm's compliance with litigation management protocol.I am satisfied with the law firm's timely and appropriate budgeting .I am satisfied with the law firm's legal analysis and related claim handling support.I am satisfied with the law firm's execution of agreed-to strategy and action plan.I am satisfied with the law firm's performance of discovery and investigation .I consider the legal cost incurred to be appropriate for the resolution of the issues involved.I consider Counsel's impact on this case to have been positive.I would use this firm on a similar case in the future .

Sample Survey Questions

Viewing Data in Context

Are there external factors potentially affecting costs and outcomes? Legislative changesWide variations in case mix: very large cases, many small cases?Aggressiveness of plaintiffs’ attorneysCustomer demandsBrand reputational considerationsCustomer risk management philosophyClaims behaviorJudicial hellholesData integrity

Understanding your data is an iterative process; litigation data is complex and has many nuances – involve “real” users in data review. If possible, also include actuaries or statisticians

Sample Firm Performance ScorecardFounders Insurance Company Firm Scorecard – 3/24/2011

Firm Name: Apple, Orange & Grapes, LLPFirm Score:Respondents: 12

Total Billings: $XXXTotal Cases: XXXAverage Case Complexity : B+

Quantitative Score Qualitative Score3.5 4.2

3.8

Pricing• Effective Firm Rate per Hour• Partner Billing Rate/% Utilization• Associate Billing Rate/% Utilization• Paralegal Billing Rate/% Utilization• Legal Expense Ratio

Productivity• Average Cost per Case• Average Duration of Cases• Average Case Values

Capacity• Firm Size• Number of Attorneys Billing Founders

Legal Skills• Case Problem Solving• Quality of Legal Advice• Quality of Legal Writings• Case Evaluation Skills• Creativity & Resourcefulness• Negotiation & Settlement Skills• Use of Dispositive Motions• Use of ADR• Subrogation Capabilities• Trial Skills• Appellate Skills• Overall Performance Relative to Staff Counsel• Overall Performance Relative to Peer Firms

Service Delivery• Responsiveness to Requests for Information from Claims• Candor in Communications• Case Preparedness• Proactive Case Management• Consistency of Performance Across Firm Attorneys

Compliance• Overall Adherence to Founders’ Litigation Management Guidelines• Use of e-Billing• Accuracy of Legal Bills• Accuracy of Case Budgets• Timeliness of Status Reports

Note: 5 – High Score; 1 Low Score

State Reporting Group Panel TypeNumber of Cases

Average Legal Cost

Median Legal Cost

Average Total Cost

Median Total Cost

Legal Cost / Total Cost

Average Cycle Time

Median Cycle Time Pct $0 Loss Cases

Pct Complex / Severe

File Assessment Score

Surveys Completed

IllinoisAgency Corporation Personal Lines Liberty Preferred 38 $9,297 $6,798 $34,486 $20,071 27% 508 401 13% 19%

Specialty Panel 5 $8,138 $7,313 $21,379 $17,898 38% 427 307 20% 50%

Commercial & Agency PAL Liberty Preferred 217 $19,105 $10,835 $75,099 $20,449 25% 583 479 30% 45% 8.7 114

Special Arrangement 10 $34,171 $19,835 $133,958 $30,152 26% 738 444 10% 60% 7.4 5

Specialty Panel 57 $27,084 $14,232 $86,941 $27,352 31% 558 393 44% 81% 8.7 38

Commercial & Agency WC Liberty Preferred 222 $7,669 $6,373 $124,479 $78,637 6% 687 301 6% 11%

Specialty Panel 1 $28,047 $28,047 $28,047 $28,047 100% 909 909 100% 100%

Personal Liberty Preferred 136 $9,642 $6,662 $50,900 $26,503 19% 644 474 15% 28%

Specialty Panel 22 $21,058 $11,039 $92,046 $76,824 23% 636 305 9% 50%

708 $18,245.67 $12,348 $71,926.11 $36,215 23% 625 426 20% 36% 8.6 157

IllinoisDate Range: 6/1/10 to 5/31/12

All ComplexitiesCCO Report data lags by a minimum of 3 months

*Construction Defect Cases ExcludedAs of Date: August 31, 2012

Venue State

Two years of closed cases (3 month lag)

Bucket by Panel # of casesAverage and median fees, expenses and losses Spend to loss ratio

Segment by line of business Case Duration

% Zero Loss and % Complex

Stages of LitigationStages of Litigation Resolution TypeResolution Type

Alternative Fee Agreements

Alternative Fee Agreements Understand what both sides want to achieve and how the

success of the AFA will be measured. Outcomes Quality Service

Understand your costs, the customer’s service requirements and your profit targets.

Clearly document the AFA terms/conditions and strive for simplicity.

Invest in the appropriate resources to analyze, manage and enhance each AFA.

Operational Improvements

Operational Improvement

Six Sigma Initiatives re Turnaround

Time

Effective Negotiation

Training

Legal Background of

Audit Staff

Provide Customized

Legal Service Delivery

Utilization of Firms per

Jurisdiction

Tools to Streamline

Process

Predictive Modeling

What Is Predictive Modeling?

“Predictive Modeling is the application of statistical techniques and algorithms to individual risk data to better understand the behavior of a target variable based upon how multiple variables interact.”

*Towers Watson, “Predictive Modeling Proving It’s Worth Among P&C Insurers” (February, 2012)

Recent Articles Discussing The Use of Data Analytics and Predictive Modeling in The P&C

Insurance Claims Process

28

Insurance Analytics: The First Step for SuccessBy Robert Regis Hyle, PropertyCasualty360.comAugust 12, 2013

The Dawn of Big Data: How lawyers are mining the information mother lode for pricing, practice tips and predictionsBy Joe Dysart, ABA JournalMay 1, 2013

New Power with Predictive Analytics By Karen Furtado, PropertyCasualty360.comApril 17, 2013

Five Ways Agents, Carriers Can Partner Using Predictive AnalyticsBy Wade Bontrager, PropertyCasualty360.comFebruary 5, 2013

Analytics, cheaper technology help risk managers with strategic planningBy Rodd Zolkos, Business InsuranceJuly 28, 2013

Prevalence in P&C Industry Adoption predicted to increase in next two years.

Pricing and product innovation Underwriting/risk selection Claim handling

85 percent of personal lines carriers surveyed are or will use it

97 percent see sophisticated underwriting/risk selection tools as essential or very important

70 percent commercial lines adoption now/< 2 years Additional uses: rates and pricing

*Towers Watson, “Predictive Modeling Proving It’s Worth Among P&C Insurers” (February, 2012)

Litigation Management Application of Predictive Modeling Early defense counsel consultation

Direct investigation Begin discovery process

Formulation of litigation strategy Predictive model may influence, provide insight on:

Expert selection Judge/jury propensities Opposing counsel tendencies (e.g., settle vs. trial)

Provides ability to make better business decisions on litigation go/no-go and go-forward case strategy.

Litigation Metrics

Helen GillcristPreston McGowan